The Rosenbaum Law Firm P.C. Blog

When my kids were born, I was told that we’d have no issues making friends with people who had kids in the same grade. For one reason or another, that really didn’t come to play. As I finally attained age 50, I look at life and realize the best friends I ever met were from school.

Maybe because I didn’t live in a time of social media in school, but friends in school weren’t so easily offended. Without Facebook and Twitter, there wasn’t any miscommunication and you didn’t know whose Sweet 16 or birthday party you weren’t invited to. As an adult, the silliness over why you lost friends is absurd, just like the time I lost a good friend because I complained that her friend was taking too many pictures of her (the friend) kids while the camp photographer.

I don’t have many regrets in life, but losing touch with so many good friends is something I’ve tried to rectify through Facebook. If I’m in an area where a friend is, I take time to meet up with them.

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The Internal Revenue Service (IRS) Voluntary Compliance Program (VCP) is one of the best methods for retirement plan sponsors to come clean and cost-effectively fix their plan errors, rather than getting hammered with substantial fines and penalties on an IRS audit. Like a good checkup, a VCP audit is a great way to find all the errors and correct them. Recently, a client retained me to work on a VCP issue. We needed the IRS approval on a retroactive amendment. A week later, they also realized that there was a loan mistake. They asked whether a new VCP application was necessary and I advised them that it wasn’t. Legal and program fees for the VCP program can be costly, so plan sponsors must discover all the plan errors that can be taken care of under one VCP program submission.

Unless you delegate a fiduciary function to a plan fiduciary such as an ERISA 3(16) and 3(38)fiduciary, it’s your call on things. When a third-party administrator (TPA) decides on their own that you will refund deferrals because of a failed Actual Deferral Percentage Test instead of giving you the option of a safe harbor non-elective contribution or a qualified non-elective contribution, that’s a problem. The problem is that it’s your call and the TPA did something that might get them labeled a plan fiduciary.

It’s important to read the contract as to who the fiduciary is under the plan, as well as make sure that plan providers don’t make choices on their own that belong to you.

When it comes to my law practice, I have an open phone call policy. I entertain phone calls from financial advisors and TPAs around the country and try to help them by answering questions regarding their current clients or potential clients. I don’t charge them for the phone calls because the retirement industry is a close-knit community and it’s all about building relationships.

A few weeks back, I got a phone call from an advisor I know and haven’t heard from for a long time. His client is a professional service practice and their new third-party administrator told them they were Top Heavy for 2018 because the old TPA screwed up.

The client is adamant about not paying the top-heavy minimum contribution and the advisor asked what the consequences would be. While not paying the required top-heavy minimum contribution could result in plan disqualification, the Internal Revenue Service is not going to take that action if they catch it on an audit. They will require the plan sponsor to make the top-heavy contribution with some interest and likely pay a penalty. Also, the new TPA will fire this client as a client because no competent third-party administrator will work on a plan where the sponsor refused to abide by the rules of qualified plans. Top-heavy contributions, minimum funding contributions, and any other mandatory contribution are like taxes, you don’t want to pay it, but you have to.

So next time your client tells you they don’t want to make a minimum contribution or make a withdrawal that is not allowed or make any action that contravenes the rules regarding retirement plans, tell them they have to play by the rules.

The problem with offering participants direction of investments is participants themselves. As a whole, they make poor investment decisions and exhibit poor timing. So that is just another reason why Bitcoin and 401(k) plans don’t match.

No regulation and too much volatility make crypto a hard no for me. Based on participant experiences of the past, my concern is that too many participants will make investment decisions that are too rash and they will lock in losses when there is a huge downswing in Crypto.

Remember when there was the beanie baby craze and people would open stores that only sold beanie babies? Same when everyone but my parents opened up a video rental store before Blockbuster killed them all. Timing is everything.

So when the largest 401(k) plan provider announces the plan to sell Bitcoin through the plans they administer as a participant-directed investment, it hurts when Bitcoin is more than 50% off its all-time high.

Timing is everything. Don’t expect much interest in crypto as long as the Department of Labor won’t change their tune and Bitcoin is struggling.

My latest article for JDSupra.com can be found here.

When I was at law school at American University Washington College of Law, I was the Executive Editor of The American Jurist, which was the student newsmagazine for my final year of law school. I wasn’t a particularly fond fan of my law school, I think they made promises to students that they couldn’t deliver on and some of the great opportunities like their law clinics were only available to a small group of students. For example, while I was led to believe my interest and coursework in tax law would merit my consideration in the tax clinic, I did not get a slot for the tax clinic because my name was not pulled out of a hat. So my year as the top editor was dedicating my columns to lambast what was wrong with the school and suggestions on how to improve certain aspects of it like the career services office, the journal and law clinic selection process, and orientation.

Certain students and faculty were very critical of my views because they said my columns would hurt the school because potential students would read the columns and then not got to our school because of what I wrote. It was pure nonsense because my columns criticized the school and then offered suggestions on how to fix the problems I pointed out. After I graduated, many of my suggestions were acted upon by the administration and I am proud of my role in helping the school out.

People don’t like criticism, they can’t handle it. If you criticize, you get labeled as a hater. It’s a label to discredit you and your opinion. I see that all the time on the community Facebook groups where people who have criticized elements of my local village are told to move. If you only allow nice, happy thoughts about things, you never get better.

Many years back, an advisor I know sent an e-mail to one of the big movers and shakers in the 401(k) industry. The mover and shaker were one of these industry spokespeople who were against any type of fee disclosure regulation. The e-mail had a simple quote from an outspoken columnist who has been critical of the abuses of the 401(k) industry. The 401(k) big shot was very offended by the quote and took many exceptions to it.

My point is that there are enough problems within the retirement plan industry to criticize and simply attacking those that do is certainly not going to help the industry out. Those that try to shout down those 401(k) critics do a disservice to the industry because it is those critics on fees and investments that have helped spur change within the 401(k) industry. That being said, some consistently attack 401(k) plans without a suggestion to improve them or a realistic way to help the retirement savings crisis in the country. When managed correctly, a 401(k) plan is one of the best employee benefits out there that has helped plan participants save for retirement and lower their current taxable income. People within this industry don’t have to be like Anthony’s neighbors in the Twilight Zone episode “It’s A Good Life” and think “nice, happy thoughts.” If you see something wrong within the industry, say something and offer a way to make things better.

Those that believe that the retirement plan industry is perfect and call those that criticize it haters are members of a flat earth society who don’t have tolerance for the free flow and exchange of ideas. There is a lot of right and wrong with the retirement plan business, don’t be afraid to speak up in trying to improve it.

My latest article on JDSupra.com can be found here